E-discounts irk old economy companies

​​India’s internet businesses are facing increasing pushback from traditional outfits. The latter is beginning to band together to fight and defend their turfDigbijay Mishra | TNN | December 07, 2018, 15:00 IST

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India’s internet businesses are facing increasing pushback from traditional outfits. The latter is beginning to band together to fight and defend their turf.

Cab-hailing companies Uber and Ola saw it. Swiggy and Foodpanda have had strikes by delivery partners. Now, online travel agency (OTA) major MakeMyTrip-Ibibo has got complaints from national hotel associations against predatory pricing and steep discounting. The associations are gearing up for nationwide protests if the issue is not resolved.

“It’s a two-way street — they (OTAs) can’t survive without us. After taking rooms at an agreed rate, online players are discounting it further and charging higher commissions. They are also changing agreement clauses more often than ever,” said Gurbaxish Singh Kohli, VP, Federation of Hotel & Restaurant Associations of India (FHRAI).

He said such practices by OTAs are making it difficult to do business with other platforms or via their own organic route. “Why would anyone book a room for Rs 4,000 if a platform is giving it for, say, Rs 3,000? And we are forced to sell rooms for rates shown on websites/apps online,” he said, adding that platforms like Booking.com have brought commissions down after consultation with hotel partners.

“Rate negotiations have become the norm now. Online companies, after on-boarding inventory at attractive rates, are asking for a bigger pie of each booking as more people prefer these platforms to book rooms. This is a clear business issue where traditional outfits are getting hurt after experiencing an initial high,” said an senior industry executive who did not wish to be named since he works with the involved parties on a regular basis.

Sources said senior executives of MakeMyTrip are expected to meet officials of FHRAI in Mumbai on Friday to look for solutions before it snowballs into a bigger problem, like it did recently for Ola and Uber, when drivers went on strike.

Jaspal Singh, partner at Valoriser Consultants, said the disruptive nature of these techled businesses is triggering the conflict more frequently than ever. “Hotels, cabs, food delivery and other such sectors being disrupted by online players had their own way of operations, largely unorganised. Now, that is being standardised on both pricing and transparency. That is putting pressure on the old economy businesses. Consumers have more options than before,” Singh said.

A spokesperson for Make-MyTrip said the company is actively engaged with its partner hotels and are in dialogue with FHRAI as well. “We are confident that we will be able to resolve any concern amicably,” she said.